Over the last 7 days, the Canadian market has dropped 2.3%, driven by losses of 4.8% and 6.4%. However, in the past year, the market is up 12% with earnings forecasted to grow by 15% annually. In this fluctuating environment, identifying undervalued stocks can offer significant opportunities for investors looking to capitalize on potential growth at a discount.
Top 10 Undervalued Stocks Based On Cash Flows In Canada
Overview: Endeavour Mining plc, with a market cap of CA$6.74 billion, operates as a gold mining company in West Africa through its subsidiaries.
Operations: Endeavour Mining's revenue segments include $612.70 million from Houndé Mine, $509.60 million from Sabodala Massawa Mine, $308.40 million from Mana Mine Burkina Faso, and $708.10 million from Ity Mine Côte D’Ivoire.
Estimated Discount To Fair Value: 48%
Endeavour Mining is trading at CA$27.57, significantly below its estimated fair value of CA$53.03, reflecting a strong undervaluation based on discounted cash flows. Despite recent legal settlements and share buybacks totaling $20 million, the company faces challenges with a net loss of $65.8 million in Q2 2024 and a dividend not well covered by earnings or free cash flow. However, Endeavour's revenue growth forecast of 11.5% annually outpaces the Canadian market average of 6.7%.
Overview: Paramount Resources Ltd. explores for and develops conventional and unconventional petroleum and natural gas reserves in Canada, with a market cap of CA$3.83 billion.
Operations: The company generates revenue from its operations in the exploration and development of both conventional and unconventional petroleum and natural gas reserves in Canada.
Estimated Discount To Fair Value: 10.1%
Paramount Resources (CA$26.1) trades below its estimated fair value of CA$29.03, presenting a potential undervaluation based on cash flows. Earnings are forecast to grow 27.48% annually, outpacing the Canadian market's 15.3%. However, shareholder dilution occurred over the past year and profit margins have declined from 35.2% to 19.7%. Recent insider selling and dividends not well covered by free cash flows are concerns despite strong revenue growth in recent quarters and ongoing share buybacks.
Overview: 5N Plus Inc. produces and sells specialty metals and chemicals across North America, Europe, and Asia, with a market cap of CA$607.31 million.
Operations: Revenue segments for 5N Plus Inc. include Performance Materials at $82.69 million and Specialty Semiconductors at $184.92 million.
Estimated Discount To Fair Value: 15.4%
5N Plus (CA$6.83) trades below its estimated fair value of CA$8.08, indicating potential undervaluation based on cash flows. Earnings are forecast to grow 36.4% annually, significantly outpacing the Canadian market's 15.3%. However, recent financial results show a decline in net income from US$10.14 million to US$4.79 million year-over-year for Q2 2024, and interest payments are not well covered by earnings despite becoming profitable this year and revenue growth forecasts of 9.8% annually exceeding the market average of 6.7%.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include TSX:EDV TSX:POU and TSX:VNP.
